IMF and Climate Change

As climate change is constantly featured in the news and publications by bodies such as the Intergovernmental Panel on Climate Change (IPCC) hint at scientific consensus on the causes and dangers of climate change, dissident voices are often overlooked. One such voice, the Corbett Report, claims the IPCC report is a political document, and that the IPCC’s scientific work has been changed to be in line with the “political” summary of the report that had been discussed by diplomats preceding the publication of the report. This would also explain why bodies such as the Secretariat of the United Nations Framework Convention on Climate Change (UNFCCC) welcomed the IPCC report, agreeing that limiting global warming will require unprecedented transitions in all aspects of society as well as a rapid transition of the world’s economy.



Against this backdrop, commentators have pointed to the importance of a recent IMF study discussing the role for financial and monetary policies in climate change mitigation. Advocating the massive issuance of “Green bonds”/“Green QE”, the IMF states that “currently, there are insufficient incentives to encourage investment in green private productive capacity, infrastructure, and R&D”. Their literature study suggests that, “because they directly influence the behavior of financial institutions and the financial system, financial and monetary policies can play a key role in addressing [issues such as “short-termism” and risk management]. Another oft-mentioned argument for renewable energy is that it removes some countries’ dependence on foreign energy providers, for example gas from Russia and oil from the Middle East.


The IMF study fits a wider pattern. In a 2018 report by the Network for Greening the Financial System, which includes a group of 18 Central Banks, it was already noted that “a few Central Banks, regulators and local authorities have introduced incentives for [commercial] banks to increase green lending and for issuers to issue green bonds”. In that connection, the IMF writes that “financial policy instruments to actively promote climate finance revolve around ‘green supporting’ and ‘brown penalizing’ factors in banks’ capital requirements, and international requirements of a minimum amount of green assets on banks’ balance sheets”.


Critical voices, however, have suggested that these “green” measures are not primarily meant to save the climate, but to allow billion dollar investments into specific sectors of the economy such as alternative energy, building insulation and the automobile industry. The financial sector, which has never recovered from the 2008 crisis, would immensely profit from these climate measures, as individuals and companies will have to take out substantial loans, without any guarantees however that investments will be recouped. A “Green Deal” along the lines of the “New Deal” of the 1930s would also allow governments to work in tandem with the financial sector to stimulate the economy with a political programme. It’s unclear whether a stronger government influence on the economy is desirable and, perhaps more importantly, the investments lead to even greater (private) debts.


Author: Dr Olivier Vonk

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